Specific language impairment (SLI) is a developmental disorder linked to deficient auditory processing. In this magnetoencephalography (MEG) study we investigated a specific prolonged auditory response (N250m) that has been reported predominantly in children and is associated with level of language skills. We recorded auditory responses evoked by sine-wave tones presented alternately to the right and left ear of 9–10-year-old children with SLI (n = 10) and children with typical language development (n = 10). Source analysis was used to isolate the N250m response in the left and right hemisphere. In children with language impairment left-hemisphere N250m responses were enhanced compared to those of controls, while no group difference was found in the right hemisphere. Consequently, language impaired children lacked the typical right-ward asymmetry that was found in control children. Furthermore, left but not right hemisphere N250m responses correlated positively with performance on a phonological processing task in the SLI group exclusively, possibly signifying a compensatory mechanism for delayed maturation of language processing. These results suggest that enhanced left-hemisphere auditory activation reflects a core neurophysiological manifestation of developmental language disorders, and emphasize the relevance of this developmentally specific activation pattern for competent language development.